COVID-19 is turning out to be one of the worst nightmares our world has faced over the past several decades. Recent data indicates that over 2.3 million people across the globe have tested positive for the Coronavirus, with over 164,000 succumbing to the deadly infection.
The US has been particularly hit by COVID-19, with more than 755,000 active cases and 40,000 deaths resulting from the virus.
These are tumultuous times for our nation, and it’s not just about the healthcare that’s crumbling. A nationwide downturn has resulted in millions of lost jobs and rising unemployment rates. According to a recent report, more than 22 million people have filed for unemployment benefits since March 14, representing over 13.5% of the American workforce.
Did you lose your job because of COVID-19? If you did, you might already be fearful about bills, rent, and mortgage repayments going out of hand. An influx of harmful financial activities could have a detrimental impact on your credit.
Access your financial situation.
The first thing you must do is to identify your current financial situation. Are you behind on your payments? Do you have enough money to make minimum bill payments? Are you likely to miss mortgage payments? This exercise will help you point out any problem areas and prepare a strategy to address them.
We have put together a resource guide to help you identify the best way to access your finances, complete with expert video Q&A sessions and more. You can find more info here.
Make sure you apply for all the benefits.
If you lost your job because of Coronavirus, you should apply immediately for unemployment benefits. Under the CARES Act, the federal government is providing an additional benefit of $600 (per week) to individuals receiving or qualifying for unemployment benefits. This additional benefit, Pandemic Unemployment Compensation, is available to self-employed professionals, contractors, and gig workers too.
Here is a resource to learn more about it.
Seek debt relief under the CARES Act.
The CARES Act provides immediate relief against multiple financial obligations, including student loans, mortgage loans, and other debts. Let’s find out more about these measures.
- Student loan relief: Under the CARES Act, the federal government has automatically suspended principal and interest payments for all federal student loans until September 30, 2020. In case you have the money to make payments, these will be applied directly to your principal amount, thereby helping you pay off the loan quickly.
- If you have a private student loan, the law doesn’t apply to your lender. However, most lenders are offering relaxations, including partial payments or suspension for the time being. It is critical that you must speak with your lender.
- Mortgage payment relief: If you have a federally-back mortgage, you can ask for a forbearance of up to 180 days under the CARES Act, provided you’re facing financial hardships. Also, if you’re facing foreclosure, the CARES Act offers protection against any foreclosure-related actions for up to 60 days after March 18, 2020.
- If your mortgage comes from a private lender, speak with your lender for alternative payment arrangements or relief for the time being. The key here is to be realistic about a repayment plan, so explain your financial circumstances clearly.
- Talk to your lenders: For any personal loans, bill payments, or credit card debt, it’s critical to speak with your lenders. Most lenders are likely to offer some alternative payment options or even a moratorium period to help you through this difficulty.
Understand credit reporting under the CARES Act.
Unlike regular credit reporting practices where lenders report late payments or timely payments directly to the bureaus, the CARES Act has introduced some changes in the reporting structure.
- If you were current on your payments, the reporting agencies would continue maintaining your status irrespective of any current moratorium periods of suspended payments.
- On the contrary, if you were delinquent on loans, reporting agencies will report it as delinquent, unless you bring them to a current status.
It’s time to practice financial restraint.
These are tough times, and you must take a disciplined approach towards your finances. You have to take a look at your budget and figure out how to minimize your discretionary expenses. Here is what you can do:
- Take account of your emergency reserves (hopefully you should have some).
- Take into account any unemployment benefits or income you’re likely to receive.
- List all necessary payments, such as grocery bills, utility payments, or other critical bills.
- Create a list of any discretionary expenses, such as streaming services or unused cable subscriptions, gym membership payments.
- Now, you have to identify whether you have sufficient money to pay for your essentials. If not, find out the shortfall and use any incoming funds or emergency savings to fill that gap.
- You have to cut down on your discretionary expenses. It may appear difficult at first, but these are desperate times, so you have to take strict steps.
A lot of people may find it difficult to do it all themselves, that’s why we’ve put together this DIY Credit Repair Kit!
Our DIY Credit Repair Kit includes:
- DIY Master Credit Repair Guide
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- Over 4hrs of Video Training
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